Decision to go with F-35s will be one target of AG’s report

Canada’s commitment to the F-35 fighter jet program is expected to come under fire when the auditor general releases his spring report on Tuesday.

Michael Ferguson’s audit will consider whether the Department of National Defence, Industry Canada and Public Works exercised due diligence “in managing Canada’s participation in the Joint Strike Fighter program.” Speculation is the answer will be no.

The F-35 has been a unrelenting pain for the Conservative government since July 2010 when Defence Minister Peter MacKay announced Canada’s plans to buy 65 of the jets to replace the air force’s aging fleet of CF-18 Hornets. In the face of continuing criticism that the deal was sole-sourced and poorly executed, the government has championed the jets’ features.

What those features are exactly is classified information contained in a document known as the Statement of Operational Requirements.

CBC News reported recently it had obtained the SOR and discovered the planes do not feature 360-degree pilot visibility, one of Canada’s mandatory requirements for the program. CBC also reported the SOR was dated only six months before the government announced its plans to buy the F-35, lending credence to critics’ arguments that the Conservatives designed the SOR in such a way that only one option, the F-35, would qualify.

The Conservatives have repeatedly noted the process for purchasing the F-35 started under the previous Liberal government. In 2002, the Liberals signed a memorandum of understanding at the developmental stage for the plane and Canada provided around $200 million to the program. In turn, Canada’s aerospace industry was allowed to bid on contracts to produce parts for the plane.

Manufacturing and testing have since proved to be sticking points for the Joint Strike Fighter program, under which the F-35 is being developed. Lockheed Martin, the plane’s manufacturer, opted for a concurrency developmental program, which means production model planes are being constructed while flight and ground testing is still underway. That process has resulted in a number of structural issues, and has been called a “miscalculation” by U.S. Vice Admiral David Venlet.

The latest report on the program from the U.S. Government Accountability Office offered a similar analysis, noting most of the instability in the program “continues to be the result of a highly concurrent development, testing, and production.”

What it’s all meant is that the F-35 family of jets — there are three variants — is behind schedule and over budget. The latter has been a major concern for the U.S., as the projected total cost of the F-35 over its lifetime has soared to more than $1 trillion. In an effort to curb its defence spending, the U.S. government has delayed purchase of 410 planes through 2017. The GAO concluded this move would reduce concurrency risks, but that the overall program affordability is still threatened.

“The long-stated intent that the JSF program would deliver an affordable, highly common fifth-generation aircraft that could be acquired in large numbers could be in question,” the GAO said.

Affordability is one reason why Canada and the other eight partner nations in the JSF program — Britain, Italy, the Netherlands, Australia, Denmark and Norway, as well as the U.S. — signed up. Economies of scale were meant to buttress the cost of each plane for participating countries, and the ability to choose a buying window theoretically offered partner nations the ability to maximize savings. However, those advantages have yet to fully materialize.

Instead, the delays have pushed the per-unit cost higher and as countries search for the optimum buying time, contingency plans are afoot — that is, in some countries. Australia has suggested it will shore up its air force by buying F-18s as interim measure before its F-35s arrive. Canada has yet to adopt a similar strategy – a Plan B, if you will – which has led many to question the government’s judgment.

As the associate minister for national defence, Julian Fantino, told a Commons committee in March, Canada has yet to sign a contract for the planes. Nor does it have to. However, at the moment, it is still planning to sign a contract for the planes in 2013 (it was first scheduled to do so in 2012), though nobody knows what number that contract might be for. Even then, however, those close to the program have hinted lately the contract may be pushed back yet again.

Without having signed a contract, it’s impossible to know what price Canada will ultimately pay for its planes. The latest Selected Acquisition Report from the U.S. military shows a Unit Recurring Flyaway Cost — that is the cost for the airframe, engines, avionics and other such equipment — averaging more than $80 million per plane between 2017 and 2023, the period when Canada would receive its planes if it signs a contract next year. However, some critics like former assistant deputy minister of material, Alan Williams, have pointed out that the SAR’s stated Average Procurement Cost — what he says is “a reflection of the cost Canada would pay” — for the F-35 is $137.41 million for 2012. In its March 2011 report on the program, Canada’s Parliamentary Budget Officer put the cost of each plane closer to $128 million when it was all said and done.

Either way, it’s understood that DND is banking on the first few planes Canada would receive in 2017 coming in at more than $100 million each. If the cards somehow all fall the right way from this point for the Conservative government, Canada’s stated $9 billion budget might be enough to cover the cost. But most who have studied the program and observed its poor performance so far are skeptical that this will be the case.

Tuesday’s report on the planes will not examine or speculate on the ultimate cost per plane, but rather focus on Canada’s decision to go with the F-35 in the first place. Should it be as scathing as some are reporting it will be, the Conservative government will have another cost to worry about — the one to its credibility.